Spin trumps substance in fizzer for the books
Mini- Budget more like a to- do list with no clues on tax- cut dilemma
In the relatively short history of post- election, pre- Christmas economic packages, none has underwhelmed as much as Wednesday’s absurdly misnamed mini- Budget.
It was more of a rehashed to- do list.
Little wonder, then, that in preceding days the Beehive was scurrying about, somewhat belatedly, in a bid to dampen expectations. Both Christopher Luxon and Nicola Willis cautioned that the emphasis should be on the word “mini”, an admission that the expectations had been poorly managed.
David Seymour, meanwhile, was hosing down prospects of material cuts happening anytime soon, saying we’d need to wait until Budget 2024.
What emerged eventually on Wednesday was a derisory six- page document with 16 decisions, mostly setting out what’s to be cut or cancelled. Much of it had been previously announced.
The problem for Willis now is that she risks getting herself into the same pickle that the British Conservative Party did with its austerity programme. Getting the budget deficit and debt under control are of themselves worthy goals. But at what cost?
The UK Tories opted for austerity in 2010 because of a conviction that forceful moves were needed to rein in spending so as to reduce debt, suppress interest rates and maintain the confidence of financial markets.
It is now referred to as the decade that broke Britain. Willis should be spooked by that.
UK research has shown that austerity led to weaker growth, a widening gap between rich and poor, greater pressure on teetering public services, reduced bargaining power for workers and no let- up in the burden on households. The numbers reliant on Britain’s biggest foodbank network jumped three- fold.
There’s a school of thought in Britain that a gentler form of austerity, one which includes some tax relief to offset the inevitable pain of deep spending cuts, would’ve been a preferable approach.
Willis will argue that that’s the Coalition Government’s approach – though of course she’ll never use the A- word, or talk about pain being inevitable.
The so- called mini- Budget was a triumph of spin over substance. It was one last opportunity to give everyone an earful about the grim state of economic affairs, before we all make a beeline for the beach.
But we go into Christmas not knowing how the full $ 14.6 billion price tag for tax cuts will be funded. And we don’t have the foggiest idea about how the Government will achieve $ 7.5b in net savings, other than abandoning “significant fiscal risks”. We’re also in the dark about how much, over and above that $ 7.5b, is needed to meet the Government’s commitments.
And likely job losses in the public
While it might be blindingly obvious to many that we don’t have the wriggle room for tax cuts, National finds itself wedded to them. They were promised in their election manifesto, they’re written into the coalition agreements.
sector as a result of cuts? Don’t ask, because nobody has figured that out yet either.
To add to the frustrating incompleteness of it all, the fiscal impact of what was agreed in the coalition documents hasn’t yet been factored in.
One thing we did learn on Wednesday is that the Finance Minister is stuck in her own echo chamber of Budget parsimony, as she repeats the same lines over and over again.
And while message repetition is a useful communication tool, the truth here is that it’s being employed to mask the fact that tax cut calculations are proving troublesome.
There’s an old saying in politics that you should never let a good crisis go to waste. Willis is demonstrating the truth of that.
With Treasury’s latest update detailing a worsening financial outlook, she seized the opportunity to put the boot into Grant Robertson’s stewardship and to promise better times on the Government’s watch.
Hence the lecture about wasteful spending, fiscal cliffs, fiscal vandalism and the need to draw a line under six years of economic mismanagement.
“We can’t go on like this,” Willis said reproachfully at one point, bringing to mind a country song that has faded into obscurity.
But if there’s to be a soundtrack, a more suitable choice would be Alice Cooper’s Welcome to My Nightmare.
For Willis’ nightmare is to be mired in a bog of dodgy sums as she tries to figure out how to pay for tax cuts, while Treasury reports that continuing economic headwinds mean that we’re confronted with more borrowing, inflation sticking around for longer, anaemic growth and receding hopes of a return to surplus soon.
At the time of the pre- election fiscal update three months ago, some economists felt the balance of risk was that the economy would prove weaker than what Treasury was expecting at the time. That is now coming to pass.
All of this underlines the foolhardiness of sweeping tax relief at such a point in time.
While it might be blindingly obvious to many that we don’t have the wriggle room for tax cuts, National finds itself wedded to them. They were promised in their election manifesto, they’re written into the coalition agreements, and Willis has heroically declared she’ll resign if they’re not delivered.
Talk about rocks and hard places. And we haven’t even touched on what other fiscal shocks might be lurking as we look ahead to 2024.
For starters there’s the OECD forecast of slowing growth, the ongoing threats to oil shipments as security worsens in the Red Sea, fears El Nino might bring drought conditions to eastern New Zealand, an immigration surge that will fuel house prices and ramp up pressure on public services. I could go on.
It is indeed the stuff of enduring nightmares.
● Mike Munro is a former chief of staff for Jacinda Ardern and was chief press secretary for Helen Clark.